CAT Mock Test – June 2010

T1 – Recording Financial transactions

1 Which of the following is not a revenue?

A Credit sales
B Receipts from debtors
C Interest charged on debtors
D Rent received
( )

2 Which item is capital expenditure for a sole trader?

A Drawings of proprietor for his own use
B Additional capital brought into the business
C Expenditure to finance day-to-day expenses
D Expenditure on the improvement of fixed assets
( )

3 Given the following, what is the amount of capital?

Buildings $40,000, Stock $6,000 Cash $500 Creditors $7,000
Bank overdraft $11,000
A $64,500
B $28,500
C $38,500
D None of the above
( )

4 Revenue expenditure will be

A Treated as a non-current asset
B Treated as an expense in the current year
C Treated as a drawing of the owner
D Treated as sales income
( )

5 Colin is recording the invoice for the purchase of a new non-current asset.
As well as the basic cost of the asset. The invoice shows the following
items:
Delivery
Installation
Maintenance
Which of the costs should be treated as revenue expenditure?
A Delivery
B Installation only
C Maintenance only
D All of the costs

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 ( )
6 What is the name of the person who signs the cheque?
A The drawer
B The drawee
C The payer
D The payee
( )

7 A direct debit is a payment made directly to the bank account when the
instruction is received from:
A The owner of the bank account
B The bank in which the owner has the account
C A debtor who owes money to the account holder
D A creditor to whom the payment is to be made
( )

8 A Purchases Journal is commonly known as

A A purchase invoice
B The purchases day book
C The purchases ledger
D The purchases ledger control account
( )

9 In March 2010 Lily bought goods for $12,000. She paid $11,000 of this by
cheque and agreed a 30 day credit period for the balance. She intends to
buy goods for $13,000 in April 2010.
What value should be reported for Lily’s payables at 31 March 2010?
A $25,000
B $14,000
C $13,000
D $1,000
( )

10 What is the purpose of a balance sheet?

A To report the current value of the business
B To indicate if the business is trading profitability
C To report the assets and liabilities of the business
D To report the personal assets of the business owner
( )

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11 The balance on Janet’s payable ledger control account is $41,554. Janet
has discovered that she has not recorded:
- a settlement discount of $53 received from a supplier; and
- a supplier invoice for $622.
What amount should be reported for payables on Janet’s balance sheet?
A $40,879
B $40,985
C $42,123
D $42,229
( )

12 Estee is preparing her bank reconciliation. She has noted the following:
(i) The bank has levied charges on her account
(ii) A cheque payable to Sandy has not been presented to the bank
Which of the above require an entry in the bank account in her general
ledger?
A Both (i) and (ii)
B (i) only
C neither (i) or (ii)
D (ii) only
( )

13 A trial balance is made up of a list of debit balances and credit balances

Which of the following statements is correct?
A Every debit balance represents an expense
B Assets are represented by debit balances
C Liabilities are represented by debit balances
D Income is included in the list of debit balances
( )

14 Credit notes issued by the business will be entered in:

A Returns Inwards Journal
B Returns Outwards Journal
C Sales Journal
D Purchases Journal
( )

15 Which statement about discount received is true?

A It increase the cash balance
B It is given to bulk purchase
C It is given by suppliers when the business pays its account promptly
D It is given by the business to debtors who pay their accounts
promptly
( )

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16 An invoice shows two items sold at $5,000 each less 10% trade discount
and 6% cash discount, What is the amount to be paid if the invoice is
settled within the stipulated period?
A $10,000
B $9,000
C $8,400
D $8,460
( )

17 Which of the following correctly describes the imprest system for operating
petty cash?
A All expenditure out of petty cash must be supported by a properly
authorised voucher.
B A regular equal amount of cash is transferred into petty cash
C The exact amount of expenditure out of petty cash is reimbursed at
intervals
D A budget is fixed for a period which petty cash expenditure must
not exceed
( )

18 Which of the following is an example of a long term liability for Joe?

A An amount he will receive in two years
B An amount he will have to pay in two months
C An amount he will have to pay in two years
D An amount he will receive in two months
( )

19 One of Peter’s customers paid $600 to clear a debt of $620.85. The

bookkeeper has not recorded the discount.
What journal entry should now be made?
A Dr Discount received
Cr Debtors

B Dr Debtors
Cr Discount received

C Dr Debtors
Cr Discount allowed

D Dr Discount allowed
Cr Debtors
( )

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20 The totals of the discount columns in the firm’s cash book were as follows:
$200 debit
$150 credit
What entry will the firm make in the Discount Allowed account?
A $150 credit
B $150 debit
C $200 credit
D $200 debit
( )

21 A differential piecework scheme has a basic rate of $0.50 per unit. Output
in addition to 500 units is paid at higher rates. The premiums over and
above the basic rate, apply only to additional units over the previous
threshold are:
Output (units) Premium (per unit)
501-600 $0.05
above 600 $0.10
What is the total amount paid if output is 620 units?
A $317
B $318
C $322
D $372
( )

22 A cash discount is best described as a reduction in the sum to be paid:

A If goods are bought on credit and not for cash
B If either cheque or cash payment is made within an agreed period
C If cash is paid instead of cheques
D If trade discount is also deducted
( )

23 A sum of $350 withdrawn from the bank and placed in the cash till is
entered:
A Debit bank column $350: Credit cash column $350
B Debit bank column $350: Credit bank column $350
C Debit cash column $350: Credit cash column $350
D Debit cash column $350: Credit bank column $350
( )

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24 When Ivan’s trial balance was extracted, the total of the debit balance was
$95 grater than the total of the credit balances. Ivan then discovered that
the entry for a cash sale for $95 had been made correctly in the sales
account but was recorded on the wrong side of the cash account.
After the error is corrected, what should the balance on the suspense
account be?
A nil
B $95 debit
C $95 credit
D $285 credit
( )

25 A liability account ______

A is increased by a credit entry
B is decreased by a credit entry
C is increased by a debit entry
D is decreased by a credit entry
( )

26 Cash discount allowed will first be recorded in _______

A Sales Journal
B General journal
C Petty Cash book
D Cash book
( )

27 The balance in the Petty Cash book shows a balance of $68 and a
reimbursement cheque amounting to $132 drawn by the chief cashier to
the petty cashier. The imprest amount is:
A $132
B $68
C $64
D $200
( )

28 Customers’ accounts are opened in the

A Cash Book
B Purchases Ledger
C Sales Ledger
D General Journal
( )

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29 Which of the following is an advantage of using a computerised
accounting system?

A Fewer ledger accounts need to be maintained by the business

B The final accounts can be prepared without the need for closing
entries
C There will be no errors in the accounting books
D Incomplete entries are not recorded in the accounting books
( )

30 A business bought goods for resale. The supplier allowed a credit period
of 30 days.
How is the accounting equations affected by the transaction?
Assets Liabilities Capital
A unchanged increased reduced
B increased increased unchanged
C increased unchanged reduced
D reduced reduced unchanged
( )

31 The bank statement of a business shows an overdraft of $2,000. There

are uncredited deposits of $2,800 and unpresented cheques of $500.
What is the cash balance to be reported in the balance sheet?
A $4,300 debit
B $4,300 credit
C $300 credit
D $300 debit
( )

32 You are given the following information:

Account receivables at 1 January 2009 $100,000
Account receivables at 31 December 2009 $ 90,000
Total receipts during 2009
(including cash sales of $50,000) $850,000

Sales on credit during 2009 amount to:

A $810,000
B $860,000
C $790,000
D $840,000
( )

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33 Henry’s trial balance includes a balance for its drawings. How should this
balance be treated in the final accounts?
A as expense in the profit and loss account
B as income in the profit and loss account
C as a reduction in capital
D as an increase in capital
( )

34 Which error will be discovered by the preparation of a trial balance?

A capital expenditure treated as revenue expenditure
B an incorrect amount entered as both a debit and a credit
C complete omission of a transaction
D an incorrect amount entered twice as a debit
( )

35 What journal entry is required to record goods taken from inventory by the
owner of a business?
A Debit: Drawings
Credit: Purchases

B Debit: Sales
Credit: Drawings

C Debit: Drawings
Credit: Inventory

D Debit: Purchases
Credit: Drawings
( )

36 Which one of the following is a reason for preparing a receivables ledger

reconciliation?
A to calculate discounts allowed
B to identify overdue accounts
C to check calculation of gross profit
D to confirm accuracy of postings
( )

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37 A motor vehicle cost $80,000 and the price included $100 for petrol. The
total payment of $80,000 was debited to the Motor Vehicles account.
What is the effect of the error on the Profit and Loss Account and the
Balance Sheet?
Net profit Fixed assets
A overstated $100 overstated $100
B overstated $100 understated $100
C understated $100 overstated $100
D understated $100 understated $100

( )

38 A business keeps a full set of books of prime entry. Which book is written
up from the copies of credit notes issued by the business?
A Purchases Journal
B Purchases Returns Journal
C Sales Journal
D Sales Returns Journal
( )

39 What is the purpose of crossing a cheque?

A to stop it being paid into the account other than the payee’s
B to speed up the time it takes to go through the clearing system
C to allow it to be paid into any account, not just the payee’s
D to tell the bank to check that there is enough money in the account
to pay it
( )

40 When completing the reconciliation between the total of the list of

balances on his payables ledger and the balance on the payables control
account in his general ledger, Tony found that no record has been made
in the accounting system of:
A discount received $27
An invoice received $622
The total of his list of balances is $84,855
Before any adjusting entries were made, what was the balance on the
payables control account in his general ledger?
A $84,206
B $84,855
C $85,450
D $85,504
( )

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41 The book of original entry is the
A ledger
B journal
C trial balance
D transaction books
( )

42 An error of principle would occur if

A motor vehicle purchased was credited to a fixed asset account
B motor vehicle purchased was debited to the motor expenses
account
C motor vehicle purchased was debited to the equipment account
D motor vehicle purchased was debited to the correct account but
with the wrong amount
( )

43 At 31 March 2010 the balance on the bank account in Jane’s general

ledger showed that she had $685 cash at the bank. When she carried out
her bank reconciliation, she found that she had omitted bank charges of
$722 for the year to 31 March 2010.
What is the bank balance that should be reported in the accounts?
A $685 debit
B $685 credit
C $37 debit
D $37 credit
( )

44 For the month of April, the following figures have been extracted from a
trader’s records concerning wages.

(i) Employees’ pension contribution $8,150

(ii) Gross basic wages $99,000
(iii) Income tax $15,000
(iv) Employer’s pension contribution $9,500

What is the total charge for wages and salaries in the final accounts?
A $108,500
B $107,150
C $116,650
D $131,650
( )

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45 Janet buys a dress costing $120, shoes costing $60 and a jacket costing
$190. These are gross figures, inclusive of sales tax at 17.5%

How much sales tax in total has Janet paid ?

A $55.11
B $64.75
C $74.48
D $68,51
( )

46 You have correctly completed a bank reconciliation. The balances are:

General ledger balance $2,450 (credit)
Bank statement balance $1,035 (debit)
The difference between the two balances is explained by unpresented
cheques and outstanding lodgements
How should the bank balance be reported in the final accounts?
A as a current asset of $1,035
B as a current liability of $1,035
C as a current asset of $2,450
D as a current liability of $2,450
( )

47 At 30 April 2010 Richard’s trial balance included the following items:

$
Inventory at 1 May 2009 23,856
Trade receivables 55,742
Trade payables 32,165
Bank overdraft 5,855
Loan due for repayment in 2012 15,000

What is the value of Richard’s current liabilities at 30 April 2010?

A $38,020
B $53,020
C $61,597
D $76,597

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48 At 1 April 2009 Brian owed $28,754 to his suppliers. During the year he
paid his suppliers a total of $185,844. At 31 March 2010 he owed $26,189.
What was the value of Brian’s credit purchases in the year?
A $130,901
B $183,279
C $188,409
D $240,787
( )

49 Which of the following statement is false

A Capital can be increased by introducing more capital
B Capital can be increased by making profit
C Capital can be increased by drawings
D Capital will be decreased if the business incurred losses
( )

50 Susan runs her own business and is registered for sales tax. This week
her purchases were $2,350 inclusive of sales tax and her sales were
$1,000 exclusive of sales tax.
The rate of sales tax is 17.5%
At the end of the week what will the sales tax account in her ledger show?
A $350 receivable
B $350 payable
C $175 receivable
D $175 payable
( )

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